Can XP (XP)'s Expanded Buyback and Dividend Underscore a Shifting Capital Allocation Philosophy?

• XP Inc. recently announced strong third-quarter earnings growth, a cash dividend of US$0.18 per Class A common share, and the completion of a BRL 1 billion share repurchase program, while approving a new buyback authorization expiring in late 2026.
• Alongside improving earnings, the combination of dividend distribution and a fresh share buyback highlights the company's continued commitment to shareholder returns and capital management.
• We'll examine how XP Inc.'s robust third-quarter earnings and renewed share repurchase plan influence its current investment narrative.

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XP Investment Narrative Recap

To be a shareholder in XP Inc., you need confidence in the company's ability to convert Brazil's expanding middle class and increased personal savings into sustained assets and earnings growth. The recent announcement of a cash dividend, robust third-quarter results, and a fresh share buyback plan reinforces XP's near-term focus on shareholder returns, but does not materially affect the biggest current risk: intensifying competition from banks and fintechs that could pressure key fee streams and net new money inflows.

Among the recent announcements, XP's newly authorized share repurchase program up to BRL 1,000 million and the completion of its previous BRL 1 billion buyback stand out, especially in context of supporting earnings per share and signaling confidence to the market. As catalysts focus on XP capturing a larger share of Brazil's growing investment market, ongoing buybacks can provide incremental support but do not directly address competitive threats to growth and margins.

On the other hand, an area investors should be careful about is how increased pressure from incumbent banks could...

Read the full narrative on XP (it's free!)

XP's outlook anticipates R$25.2 billion in revenue and R$6.8 billion in earnings by 2028. This reflects 14.5% annual revenue growth and a R$1.9 billion increase in earnings from R$4.9 billion today.

Uncover how XP's forecasts yield a $23.20 fair value, a 34% upside to its current price.

Exploring Other Perspectives

Simply Wall St Community members posted four fair value estimates for XP ranging from US$17.95 to US$23.20. While many see upside, the largest risk remains intense competition threatening revenue and margin sustainability, with broad implications for future returns.

Explore 4 other fair value estimates on XP - why the stock might be worth just $17.95!

Build Your Own XP Narrative

Disagree with existing narratives? Create your own in under 3 minutes - extraordinary investment returns rarely come from following the herd.

• A great starting point for your XP research is our analysis highlighting 5 key rewards that could impact your investment decision.
• Our free XP research report provides a comprehensive fundamental analysis summarized in a single visual - the Snowflake - making it easy to evaluate XP's overall financial health at a glance.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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